Senate Votes To Abolish Cat Fund

March 16, 1988|by STEPHEN DRACHLER, The Morning Call

After knocking back another attempt to revive it, the state Senate yesterday voted overwhelmingly to abolish the Catastrophic Loss Trust Fund, the state insurance fund that assists people injured in motor vehicle accidents whose medical bills exceed $100,000.

While the measure sent to the House passed by a bipartisan 42-5 vote, Senate Democrats warned that the proposal does not address the key issue of how to finance the millions of dollars of liability that has already been created by the four-year-old program.

Sen. Vincent Fumo, D-1st District, ranking Democrat on the Senate Appropriations Committee, charged that Senate Republicans were deliberately trying to create a crisis over the unfunded liability and use it as a wedge to force Gov. Robert P. Casey to raise taxes. They would then attempt to portray Casey as a a big spender and use it as a campaign issue.

"I hope, by god, the public realizes what you are trying to do," Fumo told Senate Republicans. "This one belongs to the media. If they report it correctly, you'll head for the hills. People who have never driven an automobile will have to pay for this."

Majority Whip Joseph Loeper, R-26th District, agreed that there will be "some unfunded liability" but said there will be "appropriate measures" provided to deal with it at a later date.

State Insurance Commissioner Constance Foster has projected that there will be up to $270 million in unfunded liability in the CAT Fund by the end of this year. Foster told House and Senate appropriations committees the CAT Fund will need to collect $6 a year for 10 years to cover the unfunded liability.

Casey, in his insurance reform proposal earlier this year, proposed switching the mandatory fund to private insurance companies. The fund provides up to $1 million in medical and rehabilitation insurance benefits to people injured in serious motor vehicle accidents.

On a virtual party line vote, the Senate rejected a move by Minority Leader Edward Zemprelli, D-45th District, to make the program voluntary and give the nine-member CAT Fund board the authority to pay claims out of the state general fund. Zemprelli had also failed in an earlier attempt on Monday to make the fund optional for the owners of the seven million vehicles in the state.

The Senate adopted an amendment by Sen. James Rhoades, R-29th District, to abolish the fund on Monday. Yesterday's vote was the final passage of the bill. Rhoades told reporters following yesterday's session that he expects the fate of the CAT Fund to be finally decided in a House-Senate conference committee.

The House Appropriations Committee Monday reported a bill to the floor that would make the fund voluntary.

"Something is going to happen," Rhoades said. "If nothing else, (the vote) is going to make us look at it."

Responding to Fumo's criticism, Rhoades said Senate Republicans "recognize we have an obligation" to deal with the claims that have already been filed with the fund, but it is too early to determine how that will be dealt with.

The CAT Fund has been controversial since it was created in 1984 as part of an insurance reform package worked out between the Legislature and the Thornburgh administration. The fund was created when the state killed no-fault insurance.

The original $5 fee was raised to $8 last year, although an actuarial study recommended raising it to $27 to cover the costs of the claims that had been filed and were expected. The CAT Fund board, in its January meeting, voted to raise the fee to $24 effective in October. That fee, board members said, was required to cover the costs of meeting the needs of the program and did not cover the liability that had accrued prior to this year.

Zemprelli, a member of the board, defended the increase, saying the board "did all it could to maintain the legislatively mandated program."

He said he offered his amendment, as a "secondary solution . . . (hoping) someone would offer something that would offer an alternative for dealing with the $270 million in liability that is outstanding.

"I will support anything that is reasonable, but you just can't leave it out there . . . The commonwealth currently has this liability. If we don't find a way to fund it, it is coming out of the tax base," Zemprelli said.

Sen. D. Michael Fisher, R-37th District, disagreed with Zemprelli's approach and said no matter what, "One thing is clear to me. The CAT Fund is dead.

"The reason it is dead, not so much because we failed in explaining it . . . no so much the way the fund was carried out. Essentially, it was because the people have told me and the rest of us, they don't want to be required by state government to buy the level of insurance that was mandated," Fisher said.

The vote to abolish the CAT Fund gutted the original bill, authored by Sen. Edwin Holl, R-24th District. Holl, chairman of the Senate Banking and Insurance Committee, had originally proposed freezing the current $8 fee, limiting yearly increases to 50 percent and giving motor vehicle owners the right to go to Commonwealth Court to have the increase set aside. Holl voted against the version that passed.

"I didn't want to have my name on a bill that repealed a vital operation in the commonwealth until there was something developed which would take its place," Holl said.

"There will be no coverage for those people who may become paraplegic or have very high bills," the Lansdale legislator said.